Government cheerleader of firms on the bourses

Mumbai: The bull run on the Indian bourses may have made Reliance Industries Ltd chairman Mukesh Ambani, the richest individual in the world, but it is the country’s government that has emerged as the most successful promoter of listed companies this fiscal.

Going by the latest research from Swiss bank Credit Suisse Group, the Indian government’s assets in the capital market, through its holdings in listed companies, has gained more than 116% since March 2007, beating the Sensex, the benchmark index of the Bombay Stock Exchange, by a big margin.

The value of the government’s equity portfolio has increased from $190 billion (Rs8.4 trillion in March) to $327 billion. Interestingly, two relatively unknown companies, commodities trader MMTC Ltd and mining major National Mineral Development Corp. Ltd (NMDC) together account for almost a third of the government’s holdings by value. The market capitalization of MMTC saw an astounding rise of 1,623% since March 2007. The 99.3% stake owned by the government in this firm, is now valued at about $48.6 billion.

While MMTC is the largest multi-bagger, the government’s 98.3% holding in NMDC is worth $50.7 billion—up about seven times since March. NMDC is currently capitalized at $51.6 billion on the country’s bourses.

Mining stocks are in demand “as mineral prices are expected to move up in the short-term,” says Manish Sunthalia, vice-president (equity) at listed Motilal Oswal Securities Ltd. “The huge rise in the stock prices of mining and commodity trading companies have aided the surge in government’s wealth in the market.” However, despite increased wealth, there is little expectation in the market the government divesting its stake in any of its portfolio companies.

“The government is planning to subscribe to SBI’s (State Bank of India) rights issue,” says Sunthalia. So where is the case of divestment?”

Two other major government holdings include those in the largest Indian public sector company Oil and Natural Gas Corp. Ltd (ONGC), and country’s largest power generation company NTPC Ltd. ONGC is now valued at $67.8 billion. NTPC is another large cash cow. The government’s 89.5% stake in the firm is capitalized at $44.9 billion. While the government’s 85.8% stake in Steel Authority of India Ltd (SAIL) is worth about $23.5 billion, its 67.7% stake in Bharat Heavy Electricals Ltd (Bhel) is worth $22 billion. The government now manages wealth of more than $588 billion—about 60% of India’s gross domestic product.